inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #0 of 150: What is going to amuse our bouches now? (bumbaugh) Tue 21 Jul 09 09:35
    


We're pleased to welcome Paul Midler, the author of "Poorly Made in China,"
a recently published book that highlights issues related to China
manufacturing. Paul graduated from college in 1992 with a concentration in
Chinese history and language, and he holds an MBA from Wharton. He has lived
in East Asia for over ten of the past fifteen years, mostly by playing go-
between for American companies in the region. In the course of his
manufacturing career, he has assisted companies of all sizes in a diverse
range of industries, working directly with hundreds of manufacturers in
China. Midler's book has received praise from many corners and has been
called a "must-read" for anyone doing business in China today.

Leading the discussion is Cynthia Barnes. Cynthia is a long-time WELL member
whose work has appeared in National Geographic, Humanities, Voyaging and
Salon. Her Slate series, 'Timbuktu for the Timid' was listed as "notable" in
Best American Travel Writing 2006. A graduate of the University of Missouri-
Columbia, she recently (and somewhat reluctantly) relocated from Bangkok,
Thailand to Boulder, Colorado. Her online home is www.cynthiabarnes.com.

In true Boulder fashion, she is currently typing with one hand, having
broken the other while cycling. She begs your indulgence.

Sorry about your injury, Cynthia, but great to have the both of you here.
Welcome!
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #1 of 150: cyndigo (cynthiabarnes) Tue 21 Jul 09 13:00
    
thanks, bruce!

paul, i wonder if we could start by telling us a bit about how you
came to be a liaison, and when you realized there was a book to be
written...
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #2 of 150: paulmidler (paulmidler-1) Tue 21 Jul 09 13:15
    
Here we go... 

Much of my manufacturing career in China was about "right place, right
time." American importers were coming to China in big numbers, and
they needed help. I spoke Chinese, and I had an interest in learning
more about export manufacturing. 

I graduated from business school at a time when manufacturing orders
were shifting to China. One of my motivations was placing myself in the
epicenter of this very interesting and historic happening. 

It may have been true that I'd always wanted to write a book, but for
years I wrote nothing at all. I just went about my business, trying to
do my best as a go-between for American companies in China. 

After a while, I realized that I was giving the same advice over and
again. And I was telling the same stories. I began to jot down some of
what I thought was important, and then the floodgates opened wide. I
had a lot to say, apparently, and after writing for some time, I
thought that there might be enough for a book. The thing evolved until
we got the narrative that we're talking about here -- "Poorly Made in
China"  
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #3 of 150: cyndigo (cynthiabarnes) Tue 21 Jul 09 14:43
    
in the book, it seems as if the continual degrading of quality is
built into the whole operation -- that if the factories delivered the
original quality at their original price, there;s no way they can make
a profit. do you think it's planned from the get-go?
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #4 of 150: Gail Williams (gail) Wed 22 Jul 09 13:19
    
That's a staggering observation and question!

A quick aside:  
If you are not a member of The WELL, you may ask a question by
emailing inkwell @ well.com -- please include "China" in the subject
line.  (I would normaly say include the whole title, but for some
reason a note about "Poorly made in China" triggered a spam-filter for
me!  Small wonder.)

Folks reading this conversation from outside The WELL's passworded
areas may bookmark it as: http://tinyurl.com/358offsite

If you are reading without being logged-in and you do have a password
here, you can post to this discussion here:  
http://tinyurl.com/358loggedin 
  
Back to the book...
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #5 of 150: descend into a fractal hell of meta-truthiness (jmcarlin) Wed 22 Jul 09 13:22
    

I just read the great reviews on amazon.com to get a sense about the
book.

I've started distrusting anything and everything made in China. It's
gotten to the point that I assume that anything with a "made in China"
label might poison or injure me or burn my house down. I've spent quite a
bit of time looking for products made elsewhere whenever possible.

I'm wondering if you think that the situation is improving even marginally?

And, as a follow up, what can we do given the current system where all
manufacturers are rushing to hand business to China with the biggest
concern cost and where the government goes along with it because the
lobbyists flood Washington with money.
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #6 of 150: paulmidler (paulmidler-1) Wed 22 Jul 09 14:01
    
Before I begin, a quick thanks to Cynthia for participating -- and
with the use of only one hand! Hope you're feeling better soon... 

Let me start off with Cynthia's comment... 

Back in 2007, I wrote an article in which I raised an alarm. I
countered the generally accepted notion that "things were going to be
all right" in China, and that "quality was going to improve." Based on
what I had seen in manufacturing, things were actually getting worse. I
called it QUALITY FADE, and while the article was passed around and
led to a few interviews, the media returned to its state of denial. And
then, of course, we had so many more quality failures in 2008 and
2009. 

For a quick look at that article, here is the link... 

http://www.forbes.com/2007/07/26/china-manufacturing-quality-ent-manage-cx_kw_
0726whartonchina.html

In the book, I made an attempt to show how wonderful things could
appear at the beginning of these contract manufacturing relationships.
At the start of one project where we were manufacturing soap and
shampoo for the US market, the American importer that I worked with
asked me: "How can they make this stuff so cheap?" He knew the price of
all the components that went into making a bottle of shampoo, and it
seemed that there was next to no profit for the manufacturer. 

I don't want to ruin the entire book for prospective readers, but in
the end we learn that there are many reasons why a manufacturer would
agree to make merchandise for next to nothing. One reason is that
"switching costs" in manufacturing are high. It was important to many
manufacturers to catch the order first. Later, once the importer was
relaxed and the orders were assured, the factory could raise prices bit
by bit, and then quality could be cheapened. 

Some have suggested that quality fade is nothing new, that it is mere
corner cutting. I have challenged this notion in a number of ways, one
of which is by tying the habit in China with a cultural inclination
towards counterfeiting. Chinese manufacturers over time were learning
tricks of the trade. They were taking a product that looked like it was
"A level" and were actually delivering "B level" goods. Chinese
suppliers have proven brazen in their attempt to manipulate quality so
as to circumvent third-part laboratory testing.

The most egregious case of quality fade involves melamine-tainted
milk. Farmers and milk collection centers began thinning out milk with
water. The milk companies caught on and began testing for protein
levels. So, then the farmers and collection centers began adding
melamine, a toxic industrial byproduct that shows up in laboratory
tests as a protein. They put in less and less milk, and more and more
melamine, until babies began dying. It's really a sad, sad case. 

Some of those who have read "Poorly Made in China" are parents, and
those with children are worried the most about products that are made
in China. I have had readers tell me, for example, that they have
cleared their kitchens and toy chests of anything that is made in
China. My sister who is about to have a baby sent me a frantic email
asking me whether I thought it was best to avoid cribs that are made in
China. This was two months ago, and since that time there has been
another major recall of baby cribs that are made in China. 

Jmcarlin's question is a good one. Is the situation improving? Well,
let me put it to you this way: China has a major quality problem, one
that is endemic and that has cultural roots. China's response to the
problem is to say "there is no problem." What do you think? Will the
problem go away on its own? My own take is that denial a kind of
guarantee that we will see further problems. The question is whether US
politicians are going to respond to the problem, or if we will
continue to close our eyes. 

HINT: Someone should ask me if consumers can have an impact by
refusing to purchase products that are made in China. 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #8 of 150: pardon my amygdala (murffy) Wed 22 Jul 09 14:38
    
Ooh, I just thought of a question. Can consumers have an impact by
refusing to purchase products that are made in China?
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #9 of 150: Mark McDonough (mcdee) Wed 22 Jul 09 14:44
    
Damn, I was just going to ask that one!  So I'll have to drop back to
a more philosophical one: What do you think the Chinese will end up
with after all is said and done?

I have a friend who's convinced that the Chinese will climb up the
value-added ladder just as the Japanese did and be a very dominant
economic power for generations.  I have my doubts, partly because I've
read just enough Chinese history to have some vague sense of the many
internal tensions and difficulties they confront.
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #10 of 150: descend into a fractal hell of meta-truthiness (jmcarlin) Wed 22 Jul 09 16:01
    

I sort of asked that question in my earlier post, albeit with some
cynicism and pessimism. Sometimes I feel like the odd lemming out who
asks about the path ahead and is told: everyone is going over the cliff
because that's what people want.
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #11 of 150: Gail Williams (gail) Wed 22 Jul 09 16:35
    
By the way, did you see this very strange news story about a suicide
of a young man working on iPhones in China, and the outrage the story
is supposedly causing within China?  Lots of details, which may be
apocryphal, in the blogs, but a lot of caution in giving just the bare
bones of the tale in mainstream media, like this account:
http://online.wsj.com/article/SB124827762524772555.html
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #12 of 150: David Albert (aslan) Wed 22 Jul 09 18:36
    
After reading the whole book, I had several questions:

1. Asked above.

2. It seemed generally as if you were suggesting that the real brunt
of the problem was borne by the importers rather than the retailers or
consumers, since retailers would typically not accept bad product and
wouldn't pay upfront, while importers had to pay before delivery.  Is
that what you intended to convey, or is it just that you work most
closely with importers and thus are most familiar with their specific
problems.

3. Were all the stories in your book exactly true as to fact, or did
you need to amalgamate various stories and/or change details (other
than just names, which you mentioned needing to change in the book) in
order to protect the privacy of your clients?

4. You gave one story (I think it was only one) in which an importer
figured out a trick to help somewhat in their bargaining power with a
Chinese factory, but all your other stories suggested that ALL the
power lay with the factory -- it really felt as if there was VERY
LITTLE that importers could do, even savvy ones, to make things better.
 Was that true then, and is it still true now?

5. How dated were these stories and how much has changed since the
stories in your book?  Some of them go back quite a ways so I wasn't
sure by the end how much may have changed from start to finish.
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #13 of 150: cyndigo (cynthiabarnes) Wed 22 Jul 09 19:14
    
all great questions! paul, thanks so much for posting your reviews. 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #14 of 150: paulmidler (paulmidler-1) Wed 22 Jul 09 21:21
    
Thanks, Murffy. Here we go: "Can consumers have an impact by refusing
to purchase products that are made in China?"

This is what media pundits like to use as an argument in defense of
China. If consumers don't like what's being produced in China, why
don't they simply pick up products that are made somewhere else? 

The suggestion is unfair to American consumers, who don't really have
much of a choice. For many product categories, there is simply no
choice but to purchase a product that is made in China. I like to use
the analogy of a car radio. You may want to listen to Brahms or Elvis,
but changing the channels may not get you where you want to be. The
reality is that the distribution channel is controlled by someone else.
Sure, you are free to change the channels, but you're only going to
have the chance to listen to whatever is playing on the radio at that
moment. 

American consuming habits are effectively controlled by those
importers who bring goods into the country. Importers control the
distribution channels. Their role is critical, and it is one reason I
chose to write this book. For those who have not yet got hold of a
copy, I focus heavily on the role of US importers in China. 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #15 of 150: paulmidler (paulmidler-1) Wed 22 Jul 09 21:39
    
Gail - I did see the story about the iphone worker who is said to have
committed suicide, and it was sad. Of course, something you won't find
in China is a TV show called "CSI: Shenzhen." These folks are not
famous for their forensic investigations, and so we won't get any
autopsy that details, for example, bruising that may not be related to
the fall itself. For those who have not followed the case, there was
talk of the worker having been beaten by security officials as a part
of their "investigation." 

Some analogy here could be made with a suicide in the Mattel case from
2007... 

http://www.telegraph.co.uk/finance/markets/2814037/Chinese-boss-of-toy-firm-in
volved-in-Mattel-recall-commits-suicide.html
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #16 of 150: paulmidler (paulmidler-1) Wed 22 Jul 09 22:07
    
Aslan - 

I'm going to address your #3 and #5 and leave the rest for tomorrow.
Great questions, by the way... 

"3. Were all the stories in your book exactly true as to fact, or did
you need to amalgamate various stories and/or change details (other
than just names, which you mentioned needing to change in the book) in
order to protect the privacy of your clients?"

The book is true to facts, and especially true to dialogue. There were
a couple instances where I took liberties with the time line, though I
did nothing that might have distorted reality. An author typically has
a certain amount of license, but I didn't give myself much at all. A
book must read well, yes, but this one maintains absolute fidelity to
events that occurred. Evidence of this may have come in the form of
notes I've received from others who have worked in the same
manufacturing settings. These individuals have written to say that my
book perfectly reflects their own experiences in China. 

"5. How dated were these stories and how much has changed since the
stories in your book?  Some of them go back quite a ways so I wasn't
sure by the end how much may have changed from start to finish."

The book reflects the manufacturing world in South China in the first
decade of the 21st century. A book is not a newspaper, and I did not
intend for it to be read and then tossed aside. Certain cultural
elements that I got down on the page are going to have staying power,
because culture doesn't change too quickly. Having said that, anyone
who attempts to write a book on China is  a fool -- because a book is
meant to be permanent, yet China is characterized by rapid and broad
change. I am personally curious to see how the book will read in ten
years. In the end, I don't see the book as a primer on doing business
in China (though I am glad that businesspersons are finding tips in the
book). More important, the book highlights the extent to which culture
affects business. Some details may become outdated, but the  point
about culture is everlasting.  
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #17 of 150: paulmidler (paulmidler-1) Wed 22 Jul 09 22:17
    
Aslan - 

On question #4... 

"4. You gave one story (I think it was only one) in which an importer
figured out a trick to help somewhat in their bargaining power with a
Chinese factory, but all your other stories suggested that ALL the
power lay with the factory -- it really felt as if there was VERY
LITTLE that importers could do, even savvy ones, to make things
better. Was that true then, and is it still true now?"

One of the things that "Poorly Made in China" does is set the record
straight on the balance of power in these manufacturing relationships.
Chinese manufacturers have a lot of leverage than the average consumer
understands. In an environment where the law cannot be used to get
people to behave properly, actors will look to situational leverage.
I've tried to show a number of areas where manufacturers hold better
cards than their customers. The imbalance was, I suggested, part of the
cause behind product quality failures.   
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #18 of 150: Linda Castellani (castle) Wed 22 Jul 09 23:27
    

Hi Paul.  I really enjoyed the book, although I was aghast at what I read.  
I, too, now want to avoid buying things that are made in China.

Have you ever wanted to be more than the middleman between the importer 
and the manufacturer and figure out a way to do more than just warn 
importers (in vain, it appears)?  Is there any way at all that the 
manufacturers could acquire a conscience?  In the case of the manufacturer 
who commited suicide, do you think he did that more because of loss of 
face or because of the financial impact to his business?  What kind of 
things have you heard other manufacturers say about it?
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #19 of 150: cyndigo (cynthiabarnes) Wed 22 Jul 09 23:35
    
the changes will be interesting! 

i've been meaning to read "a year without Made in China" to see how
the author managed. do you think the endless recalls and safety horror
stories will have an impact on either the process or the distribution
system?
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #20 of 150: paulmidler (paulmidler-1) Thu 23 Jul 09 06:30
    
Hi Linda. On your first question, yes, there were times that I wanted
to do something else. I did enjoy the challenges that presented
themselves in my role as a go-between. After a certain number of years,
though, I felt it would be more interesting to tell the story than to
go on living it. 

On the cases of apparent suicide, it is difficult to determine motive.
It is *especially* difficult since in neither case was a suicide note
ever found. It is not a reporter's job to speculate, but a good crime
scene investigator would explore the possibility of murder. 

It may be interesting to note that the majority of suicides in China
occur in rural communities, and that China is the only country where
women commit suicide in greater numbers than men. Having worked with
many brazen suppliers in China, I can tell you that their first
response to getting caught in production shenanigans is not to commit
harakiri. 

The two cases mentioned -- Mattel and iPhone -- involve a lot of
dollars and China's international reputation. There was another very
public case, involving China's global reputation -- a senior food
safety official "fell" from a building amid a related scandal. The
government called it an accident, not a suicide. 

http://www.reuters.com/article/latestCrisis/idUSPEK70797







 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #21 of 150: paulmidler (paulmidler-1) Thu 23 Jul 09 06:44
    
Hi Cynthia - 

"A Year Without China" was about a family experiment. The author
attempted to live a year without products that were made in China. The
moral of the story was, of course, that it's really, really difficult
to do. 

It would be nice to say that "it's our responsibility," but consumers
can't do much. First, in many product categories, most of what you see
in the stores comes from China and there is no alternative. Second,
people are economic creatures. You can't ask them to go out of their
way to buy more expensive things. On this point, let me digress for a
moment. There are folks in the media who will insist that China has
been great for us, because it has allowed average Americans to save a
few dollars per year. These same pundits, reporting on the quality
problem, will then turn around and say "well, if you don't like it, why
not buy something that's more expensive." 

The third problem is that consumers don't always get to find out where
a product is manufactured. I'll give you a perfect example... 

In the world of soap and shampoo, manufacturers do not always have to
indicate the country of origin. I was just last week in a supermarket
and was checking labels. Vi-Jon manufacturers soap for Topco, which
sells a generic brand into the supermarkets. Their products that are
manufactured in Canada will say "Made in Canada" somewhere, but then
there are bottles that do not offer country of origin *anywhere*. I
would bet that those bottles came from China, or some other market
where the distributor hopes to keep the information hidden.  

You have bottles of soap and shampoo in this country that say
"Distributed by X, an American company." These products give *no*
indication of the country of origin. 

It is not the consumer's job to police the supermarket shelves, or to
direct foreign economic policy It is the job of the US government.
There is a lack of leadership here, as evidenced by quality failures.
It is, by the way, the government's job to ensure that consumers have
enough product information. Why companies in health and beauty care are
allowed to skip country of origin information is beyond me, but if
this happens in one product category it goes on in others. 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #22 of 150: Betsy Schwartz (betsys) Thu 23 Jul 09 10:35
    
It's so very difficult to avoid products made in China, and it is
exponentially more difficult if you cannot afford to pay specialty
prices, and don't have a taste for hand-whittled wooden toys. If you
shop online, many retailers simply identify products as "imported" -
they may be getting the same product from multiple sources. And there
are some things that seem to be made nowhere else - like computer
printers, to name one I tried recently example. 

There are some sites that list things made in America, but it seems to
be almost impossible to keep this sort of list updated.

My biggest worry, personally, is food. A great many harmless-sounding
food ingredients are manufactured in China. Citric acid, for example.
China produces at least half of the citric acid used in food, and that
stuff is in *everything*, and who knows what sort of acidic white
powder is actually being shipped? China also produces huge amounts of
the world' sodium citrate, potassium citrate and calcium citrate.

Xanthan gum, food coloring , vitamins. Lactic acid, sodium
bicarbonate, dicalcium phosphate. All those little things at the bottom
of the ingredients lists are increasingly made in China.   After the
melamine scare I don't have much faith. 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #23 of 150: cyndigo (cynthiabarnes) Thu 23 Jul 09 11:15
    
another argument for eating locally!

since reading paul's book i've began studying labels on toiletries ...
you're right about gov't oversight but until (if ever) they step in,
we must do what we can.
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #24 of 150: Michael C. Berch (mcb) Thu 23 Jul 09 11:57
    
Hello, Paul - I guess I'll be the devil's advocate. While I've
experienced some of the poorly-made in China goods as others, there
are also many examples of very well-made goods, like the laptop
computer that I'm typing this on, and my new iPhone (which is
exquisite).  I've seen the same thing with cameras, DVD players, and
televisions. So clearly, there are a number of Chinese manufacturers
that are able to maintain high standards of quality and importers who
are able to enforce those standards.  

Also, some of my other reading indicates that Chinese manufacturers are
constantly frightened of having their export deals terminated for
either high costs or poor quality -- a specific example was direct
importer Walmart, which plays Chinese vendors against each other to
drive down costs and keep quality high. 

I have a cousin in Southern California who imports sandals from China,
and given the huge number of factories who are able to supply
low-tech, fungible goods, he does not hesitate to switch suppliers.
One crappy shipment, and someone else gets the business next time.
I guess I don't quite understand your argument that manufacturers have
market power over customers. 
  
inkwell.vue.358 : Paul Midler, Poorly Made in China
permalink #25 of 150: paulmidler (paulmidler-1) Thu 23 Jul 09 13:49
    
Hello Michael - 

Excellent point, and I'm glad you brought it up. Yes, it is true. Not
all of the products that are made in China are poorly made. Is this a
comfort, though? Not really. 

In the book, I mentioned on a trip taken back to the United States
that a crime wave had been sweeping the city of Philadelphia. In the
course of a year, 400 had been murdered, and most of these by handguns.
In the city's defense someone might have pointed out that there are
millions of people in the city, and that while 400 were murdered, many
of the city's citizens weren't! 

At one point during the quality crisis, Chinese government officials
made the claim that 99% of their goods were trouble-free. How do you
like those odds? If I told you that the chances of getting into a car
accident were 1 out of 100, would you be as willing to get behind the
wheel? What if the odds were the same for getting food poisoning in a
restaurant? In our daily lives, long story short, we need a lower
failure rate. 

You do not need to have been personally shot at to know that there is
a gun problem in your city. By the same token, you do not need to have
been personally affected by shoddy products in order to recognize that
a problem exists. 

Will pick up more from your post in my next one... 
  

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